Sample Paper on The Competitive Price Level of Audi Cars in UAE

The competitive price level of Audi cars in UAE

Introduction

            The rapidly growing economy, high population, high per capita income, commendable living standards, subsidized oil prices, and high GDP have increasingly converted the United Arab Emirates to an attractive market for luxurious automobiles, thereby sustaining a strong demand in recent years. According to McAfee (2012), The UAE’s automobile industry is increasingly becoming standardized with most companies specializing in assembly and basic designs, which has perpetuated severe competition. Despite the severe competition within the industry, UAE is singled out as the most profitable location for manufacturing cars, particularly those intended for luxurious purposes. As such, most luxury automobile companies have continued to flock the market, thereby causing the industry to flourish in the region. As reported by Kei (2011), UAE is perceived to be the next most profitable region for manufacturing automobile components, especially because it enhances low expenditure among manufacturers globally. As such, the automotive component sector is flourishing rapidly in the region. This has seen many companies with big names start venturing into the region. Following the rapid reduction in trade barriers and low shipping costs, the UAE’s economy as well as the automobile sector has experienced a remarkable change in the recent past. The region now ranks as one of the leading consumption markets for luxury cars even though manufacturing is only limited to a small number of companies. As noted by Henrik (2013), the UAE ranks as the leading consumer market in the world with the demand for private, passenger as well as commercial cars growing sharply in the region compared to other parts of the world. With the region gaining prominence due to its cost-effective supply of raw materials, integration with world automotive giants and availability of free trade areas, leading car manufacturers are competing to gain dominance in the region (Nagaraja, 2012). The companies are selling new as well as used cars at highly competitive prices and are giving out attractive packages, especially on budget and luxury cars as a way of sensitizing people about their competitive prices. Audi is one of the major companies that have greatly flourished in the region and renowned for offering competitive prices intended to boost customer satisfaction. This section aims to review relevant documents to establish the information compiled by other scholars as regards to how Audi automobile company offers competitive prices to promote customer satisfaction.

Strategies justifying Audi’s commitment to offer competitive price levels for Audi cars in UAE

            Literature indicates that Audi, which is one the major companies aiming to gain dominance in the UAE’s automobile industry, has employed significant strategies intended to enhance its ability to offer competitive prices to its product consumers. The strategies range from those employed in its production process, product innovation, marketing, and distribution. Such strategies include:

High-level manufacturing function

            Research indicates that Audi automobile company in UAE employs a world-class production function as a formidable competitive function within the industry. A study by Ozlem (2012) was carried out on various automobile companies operating in the UAE and other parts of world. The study outcomes showed that high-level manufacturing function was the main missing linking in most strategic processes. The results further showed that manufacturing function could be a commendable competitive weapon for companies if it was properly equipped and managed. As such, Audi has employed a high-quality manufacturing function by organizing production process into generic typologies of production technologies. The technologies define how production plants organize and use available production resources including machinery, human capital, and procedures employed in generating company products. For instance, Audi has job shops where equipment, as well as machinery, are employed for general function because activities take different forms and demand varying functions. The company also has a batch shop where batches of an intended product are processed irregularly through various workstations. There is also a connected line where relatively mechanized and interlinked production procedures generate fewer products with relatively similar features. A final stage in the manufacturing function is the continuous flow where the production process is largely specialized, inelastic, and resource intensive and where high volumes of products go through standardized manufacturing processes. While the high level manufacturing function outlines the important role that it can play in enhancing business strategy, it further enhances competitiveness by enabling the company to compete in markets typified by uncertain demands and high demand for standardized goods. As established by Feig (2014) in his inquiry, adopting the high-level manufacturing function enables Audi to reduce the production cost by cutting down product variety, reducing process flexibility, as well as employing a dedicated production process. Feig (2014), therefore, concluded that employing the high-level manufacturing function creates an opportunity for Audi automobile company to offer competitive product prices as most products are created using only the cost- effective production dimensions. Similarly, the chosen production process is linked to specific consumer demands for certain product features that are created in large volumes but at a low cost, which further increases competitive priorities.

 

Flexibility in production

            Research has also shown that Audi affords to offer competitive product prices to its customers because it employs a great deal of flexibility in production, which significantly reduces the overall production cost. A study that was carried out by Adrian (2015), indicated that Audi enhances flexibility by deploying and redeploying production, which is a key requirement imposed by changes occurring in the environment. As such, flexibility, which is a key element in the company’s production process, corresponds to various cross-sectional goals, such as time, quality, and cost. For instance, flexibility during production enables Audi to effectively cope with various forms of variability, such as fluctuating quantities in demand, seasonally fluctuating raw materials, and unpredictable lead-time, which require varying levels of flexibility. On this note, Audi manages to offer high-quality products as per each customer’s demands at competitive prices compared to the rival companies within the industry. Flexibility in production ensures that Audi is able to adjust or reach the limited penalty time, cost, manpower or performance. This gives the company a competitive advantage against other contemporary automobile companies operating in the UAE, which creates an opportunity for Audi to place competitive prices for its products. This is especially because such organizations are constantly facing challenges linked to frequently emerging manufacturing philosophies as well as technologies that often outdate the existing ones. Such companies have to cover up for the cost instilled by such challenges and hence cannot afford to place competitive prices for their products.

 

Innovation

Research has further indicated that innovation is another strategy that Audi adopts to be able to give high quality products to its customers at competitive prices. An inquiry that was conducted by Wasgburn (2009), showed that innovation, which describes the process of developing something new, is a reliable tool that Audi employs to promote diversity as well as the risk taking capacity that enables it to create high quality products at a low production cost. Wasgburn further found that Audi’s senior management is highly committed towards encouraging a significant level of innovativeness to not only ensure that things are done well but also ensure that new and better things are also created. From Wasgburn’s point of view, innovativeness is the company’s single most important element in promoting a sustainable competitive advantage. Furtwengler (2010) carried out another inquiry investigating how Audi applies innovation. Furtwengler (2010) discovered that the companies have invested in continuous efforts, dedication, and understanding that goes beyond constant improvement. Furtwengler (2010) concluded that effective application of innovation could lower production cost, which in return ensures that the company is able to offer high-quality products at competitive prices.

Approaches To Dispense Competitive Price Levels for Audi Cars in UAE

            Research shows that Audi, just like any other renowned automobile company, aims to gain dominance in the potentially favorable and attractive market in the UAE. As such, the company has adopted various approaches through which it can maintain a competitive advantage against its rivals while on the other hand generating rational profits that can keep it buoyant in the market. Literature has confirmed that the various approaches that Audi employs in offering competitive price levels on products include:

Pricing

            Literature shows that Audi is concerned about employing a rational pricing strategy with the primary objective of remaining competitive in the market while, on the other hand, generating profits and rational returns on investment. The company thus pursues to set reasonable prices that will generate enough profits and trigger a positive impression on potential customers. An inquiry that was carried out by Berry (2011) to establish Audi’s pricing strategy in the UAE showed that the company employs premium pricing as an effective pricing strategy. Employing this strategy is justified by the fact that the price instilled on a product often impacts consumers’ perception pertaining the product quality. Berry (2011) found that costumers often associate high product prices with prestige, following the assumption that quality raw materials and components cannot be cheap. Berry (2011), therefore, concluded that it was reasonable for Audi to place premium pricing on its products. As Wasgburn (2009) established through a cross-sectional inquiry, business history is various companies showed that placing low prices on various prestigious products negatively impacted sales. It can therefore be concluded that employing premium pricing enables Audi to effectively reach the target market, increase sales, and generate high profits as well as returns on investment. This enhances competitiveness on the side of the company as it manages to trap customer loyalty, which gives it a competitive edge ahead of other rival companies operating in UAE.

Another study that was carried out by Ozlem (2012) showed that Audi also employs the discretionary product pricing, a strategy intended to increase the total amount that a consumer spends on a product once they start buying. Ozlem established that Audi offers optional products as well as equipments that customers can add to their cars. For example, Audi offers pearl color as an optional product that customers can add on their vehicles for an additional fee. Audi also offers a highly distinguished sound system, tailgate, glass roof, and navigation system that help to add more prestige to the product. On this note, it is reasonable to conclude that customers interested in prestige do not mind paying an extra fee for the optional product, which gives Audi a competitive advantage over other rival companies.

Literature also shows that Audi further employs the geographical pricing strategy as an effective way to perpetuate competitive levels and generate high profits and returns on invested resources. According to Nagaraja (2012) Audi employs this type of pricing strategy as a useful tool to satisfy its customers, generate profits, and maintain a competitive edge in areas within the UAE that have varying product prices. Although companies perceive geographical pricing strategy as unfair, especially in region that potentially pay higher prices, Audi manages to make proficient pricing decisions depending on distance and economic status in those locations to avoid possible negative implications on its product demand. Therefore, it can be concluded that Audi maintains a competitive edge against other rival companies operating in UAE by making proficient decisions that allow it to effectively employ the geographical pricing strategy to satisfy target customers as well as generate high profits.

Re-branding

            An inquiry on existing literature has shown that Audi has adopted rebranding as the new strategy to enhance growth in the currently overcrowded market environment, enhance customer satisfaction, and maintain a competitive edge against other rival companies. According to McAfee (2012), the need for rebranding in Audi was justified by constant depression in the motor trade that saw sales volumes declining by about 15%. Although Audi, particularly in 2011, was faring well, total growth amounting to 0.4%, its performance was nowhere close to expected performance levels. A study conducted by Southerden (2012) sought to investigate how Audi undergoes the rebranding process to enhance its competitive advantage. Findings of the inquiry revealed that rebranding followed Audi’s discovery that the large saloon sector had gone down, and hence, it had to go beyond the conventional prestige heartland to succeed. The Supermini segment, despite also facing recession, occupied 32% of the total motor market, which created a huge opportunity for the company. As such, Audi rebranded it Supermini product by launching the Audi A1, which was the prestige vehicle that would be contending in the Supermini market. The company further rebranded its consumer insight by changing the perception that small is equivalent to worse into thinking that small means good, especially when it is about prestigious brands. The company created a new perception that prestige generates consumers’ “prestige” through proper pricing, product specification, scarcity, and exclusive design.

Henrik (2013) carried out further inquiry to determine how Audi distinguished itself with rival companies operating in UAE through rebranding. Henrik (2013) discovered that to most competing companies in the region, prestige brands tend to tier what they offer with each triumphant tier symbolizing a greater level of quality as well as quantity features. As such, such companies believe in promoting quantity in their brands as a way of promoting a higher level of status for their consumers. For instance, the British Airways offer its high tier status through world-class travel services while the American Express distinguishes prestige through issuing class-related cards. Similarly, such tiers are prevalent in the automobile trade, as most prestige manufacturers believe in offering large luxury vehicles as a tier to prestige. During the inquiry, Henrik (2013) discovered that rival companies operating in UAE, which include BMW and Mercedes Benz, distinguish luxury products through quantity-related classes with each higher class symbolizing a bigger car that is perceived to be more prestigious. This explains why leading companies, such as BMW have avoided competing in the Supermini segment rather than indulging in sub-brands, such as the Mini. This is because they perceive small as being cheap. Henrik (2013) however discovered that Audi did not necessarily associate the size of a car with prestige. The company believed that there was a segment of consumers interested in buying small cars, not because it was the cheapest thing that they could afford but because it best addressed their needs. Changing consumer perception about small cars placed Audi in a strategic position where it could place competitive prices on products to generate profits, enhance customer satisfaction, and maintain a competitive edge in the market.

Product Exclusivity and Specification

            Literature has also shown that Audi employs the product specification approach to dispensing competitive prices to its customers, enhance customer satisfaction, and maintain a competitive edge in the market. An investigation conducted by Kei (2011) showed that Audi employs tangible product elements, which include things that can be seen, as well as intangible elements, which include perceivable elements pricing to enhance competitive prices on products. Just like in other location in the world, UAE’s Audi creates different types and categories of luxury vehicles to satisfy the taste and demands of its customers. The various cars that the company creates vary from family sedan car to high-speed sports cars. However, the company cuts production cost by employing similar technology in creating the various types and categories of cars. Employing similar technology in production further increases the product features and quality. As explained by Feig (2014), Audi creates fully galvanized and zinc coated car body frames to shield them from corrosion as well as rusting. The resultant body durability exceeds the company’s basic expectations, which causes the manufacturer to extent its warranty period from ten to twelve years. This factor has created a new perception that Audi products are superior in life expectancy and quality to those of the rival companies. It can therefore be concluded that Audi’s ability to set the pace and distinguish its products from those of the rival company promotes customer satisfaction. Promoting customer loyalty ensures that the company can save production cost while generating high quality products that can be dispensed at competitive prices thereby allowing for generation of high profits and returns on investment.

Conclusion

            Literature has shown that Audi, which is one of the automobile companies seeking dominance in the UAE’s automobile market, is employing different strategies and approaches to boost its capacity to offer competitive prices on its products. A review of existing data has shown that the company relies on its production strategies to place competitive prices on its products while ensuring high customer satisfaction, profitability, and high returns on investment. The production strategies include adopting high quality manufacturing function, innovation, and flexibility in production. Literature has also shown that Audi relies on certain approaches that ensure that it wins customers into paying competitive prices on products, satisfies them, and maintains a competitive edge in the market. These approaches include pricing, re-branding, and Product exclusivity and specification. Sufficient evidence indicates that the reviewed literature is relevant in responding to the study questions in that it outlines how the company manages to offer competitive prices and enhance customer satisfaction. Further research is however critical to help investigate how offering competitive prices on products links to customer satisfaction.

References

Adrian, B. (2015). Brand Equity in Premium Car Market, Communication Research, 5(2):45-78.

Berry, L. (2011). Marketing Services: Competing Through Quality. New York: Free Press.

Feig, B. (2014). Hot Button Marketing. London: Adams Media.

Furtwengler, D. (2010). Pricing for Profit: How to Command Higher Prices for Your Products and Services, New York: American Management Association.  

Henrik, U. (2013). The Sins of Brand Portfolio Management, Brand Management, 10(4):111-167.

Kei, T. (2011). Improving Technical Quality in Repair Service to Achieve Customer Satisfaction in Automotive After-Sale Services. Retrieved on 10th Feb, 2016 from http://lbms03.cityu.edu.hk/theses/abt/engd-meem-b40869404a.pdf

McAfee, P. (2012). Competitive Solutions: The Strategist’s Toolkit, Princeton, NJ: Princeton.

Nagaraja, N. (2012). Customer Satisfaction in Automobile Industry-An Indian Online Buyers’ Persepctive of Car Manufacturers’ Websites, international Journal of Multidisciplinary Research, 2(6):92-107.

Ozlem, B. (2012). Transformation and E-Business Applications in Automotive Multinational Corporations: A Mixed Methods Study, Multiple Research Approaches, 6(1):89-198.

Southerden, E. (2012). Audi A1 Launch: Small is Good.  Retrieved on 10th Feb, 2016 from https://www.marketingsociety.com/sites/default/files/thelibrary/HC%20Audi%20A1%20Launch.pdf

Wasgburn, H. (2009). Why People don’t But Things: Five Proven Steps to Connect with Your Customers and Dramatically Increase your Sales, Cambridge: Cambridge University Press.